ZAGG Management Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 2.13 | About: ZAGG Inc (ZAGG)

ZAGG (NASDAQ:ZAGG)

Q2 2013 Earnings Call

August 01, 2013 5:00 pm ET

Executives

Kimberly Rogers-Carrete

Randall L. Hales - Chief Executive Officer, President and Director

Brandon T. O'Brien - Chief Financial Officer, Principal Accounting Officer and Corporate Secretary

Analysts

Isela Soto - Roth Capital Partners, LLC, Research Division

Ross Licero - Craig-Hallum Capital Group LLC, Research Division

Paul J. Chung - JP Morgan Chase & Co, Research Division

Michael Latimore - Northland Capital Markets, Research Division

Jon R. Hickman - Ladenburg Thalmann & Co. Inc., Research Division

Sarang Vora - Janney Montgomery Scott LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the ZAGG Inc. Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would like to introduce our host for today Ms. Kim Rogers, from Genesis Select, Investor Relations for ZAGG. Ma'am, please go ahead.

Kimberly Rogers-Carrete

Good afternoon, ladies and gentlemen, and thank you for joining us today for the ZAGG Inc. Second Quarter 2013 Conference Call. On the call today from the company are Randy Hales, President and Chief Executive Officer; along with ZAGG's Chief Financial Officer, Brandon O'Brien.

By now, everyone should have access to the second quarter earnings press release. If you have not received a copy of the release, it can be found on the Investor Relations portion of the ZAGG website. This call is being recorded and a podcast of the conference call will also be archived at the ZAGG Investor Relations webpage under Events for 1 year.

Before we begin, we would like to remind everyone that the prepared remarks contain certain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future results of operations or the performance of the company. These statements do not guarantee future performance, and speak as of the date hereof. We refer all of you to the risk factors contained in ZAGG's annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Security and Exchange Commission for a more detailed discussion on the factors that can cause actual results to differ materially from those projected in any forward-looking statements. ZAGG assumes no obligation to revise any forward-looking statements that may be made in today's release or call.

Please note that on today's call, in addition to discussing the GAAP financial results and the outlook for the company, the following pro forma financial measures will be discussed, adjusted EBITDA and pro forma net income. And the explanation of ZAGG's use of these non-GAAP financial measures in this call and the reconciliation between GAAP and non-GAAP measures required by SEC Regulation G is included in ZAGG's press release today, which again can be found on the Investor Relations section of the company's website. The non-GAAP information is not a substitute for any performance measure derived in accordance with GAAP, and the use of such non-GAAP measures has limitations, which are detailed in the company's press release.

And with that, I would now like to turn the call over to ZAGG's CEO, Randy Hales. Randy?

Randall L. Hales

Thank you, Kim. Thank you for joining us on the call today. I will begin with comments on our strategic and operational performance and Brandon will follow me with a detailed discussion of our financial results.

Revenue in the second quarter was $51.2 million with gross margins coming in at 42%. During the quarter, we focused aggressively on cost management and were able to realize operating efficiencies that resulted in improved gross margins, EBITDA, net income and EPS versus Q1. The results for this quarter indicate that the business is improving but when compared to the second quarter of 2002, we are still feeling the effects of the lack of major device launches and an execution shortfall associated with our growth drivers.

ZAGG's sales grew dramatically in the past few years and as that growth has flowed in recent periods it has brought to life organizational weaknesses that were masked by our period of hypergrowth. As we progressed through the second quarter, we realized the greater extent of our challenges, particularly with the lack of execution against the 2 most important growth drivers in our 2013 plan, product expansion with existing customers and distribution growth with new customers.

As the impact of these factors became more apparent, we determined that it was necessary to preannounce and lower our 2013 revenue guidance. As a direct result of the execution shortfall, I am expanding my responsibilities and working more closely with our sales team. My efforts will be focused on growing our distribution by bringing on new customers, while Derek Smith, our Executive Vice President of Domestic Sales, will concentrate his efforts on product expansion with existing customers.

We have also expanded our executive team to provide further operational oversight for the organization. Earlier today, we announced the hiring of Jason Schwartz, as COO, to oversee operations including inventory management, purchasing, logistics, supply chain, distribution and Asia sourcing, including factory qualification and selection. We are very pleased to welcome Jason to our executive team and look forward to the great work he will do at ZAGG as we focus our efforts on building a solid foundation for continued success.

Additionally, we have initiated a search for a Director of International Sales to help expand our footprint outside the domestic market with a short-term emphasis on Europe, where we are experiencing softness.

During the second quarter, the ZAGG management team started implementing necessary changes to build an organization that is designed to deliver smart growth going forward. We are defining smart growth as consistent and disciplined growth built on a base of business that has the breadth and depth to minimize the impact of macro events and is supported by a solid foundation of operational disciplines.

The difficult distribution changes we made earlier in the year proved to be an important step toward building a platform for smart growth. This change has allowed us to have better visibility and the management of our pricing strategies in all areas of our distribution. During the quarter, our new distributors were fully on boarded and have begun ramping up quickly. The price discipline in the market as a result of the distributor changes has been favorably received and has served to strengthen our key customer relationships.

One of the most important modifications made in the quarter has been the development of a more robust sales forecasting discipline. We are increasing the time and resources allocated for both product and sales training with the goal of building a world-class account management team. Coaching, training and mentoring will become an even more important part of the ZAGG culture. In addition, we have strengthened reporting tools to provide better visibility into the overall business and a more timely reporting methodologies, including predictive reports that provide weekly insights into sales trends.

Our strategic objectives creative product solutions, building the preferred brand and targeted global distribution, play a central role in our goal of delivering smart growth. These strategic objectives guide our actions and decision-making process. The products we launched this year will play an important role in growing our business with existing customers and will help open doors with new customers, while strengthening our brands.

We have built a product platform that allows our customers to have one-stop shopping for mobile accessories, which gives ZAGG a competitive advantage in a highly fragmented market. Recent industry data shows ZAGG's brands remained leaders in mobile computing accessories markets. The ZAGG brand is the revenue leader in tablet accessories, and the iFrogz brand is one of the top 5 in personal audio during the last year in terms of units sold. These results confirm the success of our brand and product strategies.

As a general rule, we enter product categories where we can offer differentiated products. Our product management team is currently managing products in 7 key categories with 2 new categories being added this year: Desktop audio and gaming. Initially, we had planned to introduce our Caliber game controller online in late June, with a full rollout near the end of Q3. We made significant progress with over 40 titles committed to support our online launch.

In early June, the landscape changed with the Apple announcement of a standard iOS software protocol for game controllers. We view the announcement as a positive because it will allow for a much broader base of compatible gaming software titles. However, it has delayed the introduction of our controllers until late this year. We understand the challenges associated with this launch and have forecasted only negligible contributions in our 2013 guidance from the Caliber.

Our product pipeline for the remainder of the year and into 2014 is looking very strong. In June, we introduced 2 completely redesigned keyboard products for the iPod Mini. These products have received rave reviews from the likes of The Wall Street Journal, Got To Be Mobile, ZDNet and CNET. The new, extremely thin form factor includes a hinge that allows for multiple viewing angles and provides as much as 30% more typing area than competitive product offerings.

In addition, we had recently launched a redesigned version of our universal keyboard that works with all Bluetooth-enabled devices on all operating systems. In the month of June, we launched -- relaunched, rather, our entire invisibleSHIELD product line with new and improved formulations for our original, Smudge-Proof, HD and EXTREME film products. I'm pleased with the progress our product team is making.

We have also implemented operational improvements to lower cost and an improved gross margin and cash flow. One example of this is airfreight. Earlier this year, we put into effect new processes and procedures surrounding the use of airfreight and the results are impressive. In the first 2 quarters, we saved $4.4 million as compared to the same period last year. We anticipate increased airfreight utilization in the second half of the year due to the upcoming device launches and introduction of the Caliber gaming controller. However, we will continue to follow our new protocols and continue to minimize this expense.

We have restructured our in-store support program by expanding our training team. Previously, we have had 4 to 6 in-field trainers, that at their peak, trains 3,000 stores a year. In 2013, we hired 16 interns that have trained over 8,000 stores in the past 3 months. I traveled with our training team recently, and I can tell you that they are great ambassadors for the company.

Another significant operational change being made is the way we purchase our invisibleSHIELD products. We are now in the process of implementing a turnkey solution that, over time, will lower our inventory balances and decrease the working capital associated with the invisibleSHIELD. Historically, our multistage approach tied up a lot of cash in raw materials, while increasing our inventory carrying balances. This new turnkey solution will be fully implemented over the next several quarters.

Recently, we implemented a bimonthly meeting discipline we called SPI, sales, purchasing and inventory. The purpose of SPI is to bring sales, purchasing and inventory managers together twice a month to review forecasts and improve our demand planning as an organization. With time and effort, this, too, should yield lower-inventory balances and help decrease our working capital requirements. Inventory management disciplines with a focus on increased turns, will be an important near-term objective for our new COO.

Another area, where Jason will have a near-term impact, will be working with our supply chain from manufacturing to retail shelves to make sure we are prepared for the highly anticipated device launches coming this fall.

Looking at the remainder of the year, we have several milestones including the launch of our mobile gaming products. We are entering an exciting time for ZAGG as we sharpen our focus and build a foundation that will further expand the company's leadership position in mobile computing. While we have made progress this quarter, many of the initiatives I've outlined are still in their initial stages and their full impact will become more evident in future quarters. The entire ZAGG team is committed to making the changes that will support our smart growth plans going forward.

With that, I would like to turn the time over to Brandon for a detailed discussion on our financial results. Brandon?

Brandon T. O'Brien

Thank you, Randy, and thank you for joining us today to review our second quarter 2013 financial results. As stated in today's release, we will be disclosing consolidated financial results affecting our primary operations within the United States, as well as our international operations from ZAGG International, our wholly-owned subsidiary operating out of Shannon, Ireland.

During the call today, I will speak only to consolidated results unless otherwise stated. The financial statements provided in today's release reflects consolidated Q2 2013 financial details, as you may refer to them for further clarification.

Revenue for the quarter was $51.2 million versus $61.6 million in the quarter from the prior year, representing year-over-year decline of 17%. The year-over-year compare was primarily impacted by the delay in new mobile device launches, product expansion with existing customers, progressing more slowly than originally expected, and new accounts taking longer to come online than originally planned both in the U.S. and Europe.

As a result, we lowered our guidance for the remainder of 2013. Our revenue guidance is now a range of $245 million to $252 million from the previous range of $274 million to $280 million. And for adjusted EBITDA we are now forecasting $41 million to $42.2 million, down from the previous range of $55 million to $57 million. Our new adjusted EBITDA guidance reflects our anticipated investment against sales and product management for the remainder of the year, possible increases in airfreight for products that will ship to support new mobile device launches and marketing spend for new products being launched in the second half of the year.

The breakdown for the sources of revenues is as follows: For the quarter, 86% of sales came from our retail channel versus 79% in the same period last year; 9% of sales were from ZAGG.com and iFrogz.com versus 15% in the same quarter last year; and 5% were from the kiosk and standalone stores versus 6% in the same quarter last year.

The international sales accounted for 10% of total revenue in the quarter versus 12% in the same quarter last year. The international sales has been impacted by the difficult economic conditions in Europe, the largest market for us overseas. As Randy mentioned, we have announced the search for a Head of International Sales to bring a higher level of attention to the global growth opportunity.

Revenues from the invisibleSHIELD product line were 38% of net sales versus 41% in the same quarter of last year, and the keyboard product line contributed 25% of net sales versus 28% in the same quarter of last year. Gross profit for the quarter was $21.5 million versus $28.4 million from the same quarter of last year, which translates into gross margins for the quarter of 42% versus 46% for the prior year period. Gross margins benefited in the quarter from the reduction of airfreight expenses that Randy mentioned earlier.

The decrease in gross profit percentage year-over-year is due to a number of factors including the continued product mix shift as sales for our invisibleSHIELD products, our higher gross margin product category, decreased as a percentage of overall sales compared to the second quarter of 2013. Sales of our iFrogz audio products, which carry a lower gross margin than our corporate average, were higher in the quarter over the same period.

Lastly, online sales, which are typically at a higher gross profit than sales to other channels, decrease as a percent of revenue from 15% to 9%, compared to the second quarter of 2012 to the second quarter of 2013.

Operating income in the quarter was $5.4 million versus $10.8 million in the same period last year. Operating margins for the quarter were 11% compared to 18% for the same period last year. In the quarter, there was a non-cash impairment charge of $0.6 million related to shares of stock in a private company recovered in foreclosure in 2012 and which served as collateral loan and note receivables. We also incurred $1.3 million in stock compensation expense during the quarter, compared to $1.5 million from the same quarter of last year.

The effective tax rate for the quarter was 40.1% compared to 39.2% for the same period last year. We anticipate our tax rate for the remainder of the year to average closer to 38%. Net income in the quarter came in at $2.8 million versus $5.8 million from the same quarter in the prior year. Our fully diluted share count for the quarter was 31.2 million shares. At June 30, 2013, we had 0.6 million outstanding options, 0.4 million outstanding warrants and 0.4 million outstanding restricted stock grants. We used the treasury method in calculating our diluted shares outstanding.

Our fully diluted earnings per share were $0.09 for the quarter versus $0.18 in the same period last year. During the quarter, we incurred the following non-cash charges, which we have tax affected in the calculation of pro forma EPS, assuming a statutory rate of 38.25%. $1.3 million or $0.03 related to stock-based compensation. $2.4 million or $0.05 related to amortization of intangible assets. $0.6 million or $0.01 related to the impairment of private company common stock. These losses are not currently tax-deductible so loss has not been tax affected. $0.6 million or $0.02 related to our equity method investment in HzO. These losses are not tax-deductible, so losses have been tax affected.

Pro forma net income for the second quarter of 2013 was $6.3 million or $0.20 per diluted share as compared to pro forma net income of $8.6 million or $0.27 per diluted share in the second quarter of 2012. Total non-cash charges, net of tax included in the calculation of pro forma net income, totaled $3.5 million in the quarter or $0.11 per diluted share. Adjusted EBITDA for the quarter came in at $10.5 million compared to $15.1 million for the second quarter of 2012.

Turning to the balance sheet. Working capital at the end of the quarter was $74.9 million compared to working capital of $89.4 million on December 31, 2012. We reported a cash balance of $13.6 million. For the second quarter, we generated cash from operations of over $5 million. During the quarter, we paid down $13.1 million on our line of credit and $2 million on the term loan. At June 30, 2013, the balance on the line of credit is $4.6 million and the term loan balance was $22 million. Accounts receivable for the quarter were $31.3 million, as compared with $54.6 million at December 31, 2012.

DSOs in the quarter were 56 days compared to 57 days for the quarter ended December 31, 2012. We continue to be very comfortable with the quality of our accounts receivable. Inventories for the quarter were $46.8 million compared to $40 million at December 31, 2012. Inventories continue to be one of our largest asset categories, and we are continuing to refine our processes and management to best optimize our inventory levels. Jason Schwartz, our new COO, brings a wealth of industry expertise in logistics and inventory management, and I am confident inventory optimization will be a near-term focus in our business. Though inventory levels are higher in the quarter, I feel we are in good shape here. Most of the increase is due to product having shipped from China and transitioning from prepaid deposits into inventory.

Included in the increase are ZAGG keyboard products, for which there is high demand, as well as iFrogz audio products for upcoming resets and subsequent reorders with some of our key accounts. The new products make up over 1/3 of our current finished goods. HzO continues to progress with their strategies of commercializing their technologies. HzO has deployed machinery in the U.S., Japan and China. HzO is already included on several devices with an emphasis on wearable devices. Lastly, HzO was awarded the best technology award at the Wearable Computer Show in New York City. We are excited with the progress they have made to date and look forward to some new announcements from HzO later this year. At June 30, 2013, our ownership percentage in HzO was 22.7%.

With that, I'd like to turn the call back over to Randy.

Randall L. Hales

Thank you, Brandon. Now -- we'll now turn the time over to the operator to open the call for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Dave King from Roth Capital Partners.

Isela Soto - Roth Capital Partners, LLC, Research Division

This is actually Isela Soto on for David King. Besides the product mix, what were some other factors that weighed on gross margin this quarter? And then how much of an impact was there from each?

Randall L. Hales

So there were several things. Obviously, we talked about mix a little bit and the change with invisibleSHIELD and keyboards representing lower percentage of our product mix during the quarter. And then of course, the management of the airfreight helps to -- we roll airfreight into the gross margin calculation, and so that helped to bolster some of the take away from the invisibleSHIELD representing a lower portion of our sales.

Isela Soto - Roth Capital Partners, LLC, Research Division

That's helpful. And then just -- you mentioned several factors that impacted revenue this quarter. Can you talk about the specific impact of each and then did any of those factors affect one product more than others?

Randall L. Hales

You bet. So the key reasons for the draw on revenue this quarter had to do with, as we stated earlier and in the last quarter call, the lack of major device launches. That accounted for more than 50% of the pull down on our revenue. And then right behind that, we had anticipated penetrating our existing customer accounts better at this point in time during the year. In other words, selling more of our products into them and that has not matured as quickly as we would have liked it to. And then secondly, we have not closed the new business that we had anticipated closing by this point in time when we put the plan together. So those areas -- of course, we don't have any influence on the device launches, but those 2 that we control, we certainly added a lot of emphasis and put some resources towards moving the needle forward in both of those areas.

Operator

And our next question comes from the line of Ross Licero from Craig-Hallum.

Ross Licero - Craig-Hallum Capital Group LLC, Research Division

So we're looking at about 40% gross margins for the first half of the year, with the bonus of that $4.5 million airfreight savings. What are we looking at for the second half of the year considering that airfreight's going to be higher?

Randall L. Hales

Yes. Ross, we still feel very confident in the guidance that we put out there that gross margins will continue this year in the low- to mid-40s.

Ross Licero - Craig-Hallum Capital Group LLC, Research Division

Okay. Great. And can you talk a little bit about what drove the lower Internet sales, particularly given the distribution transition. One would think it would be a little bit higher given that transition.

Randall L. Hales

Yes. They don't necessarily correlate and those distributors that we moved away from. The customers they were servicing aren't necessarily going to move over and come in and buy product online, because they don't get the discounts that they would need to support a resale of those products. So we don't see a direct correlation there. I think our web sales is really reflective of what we've seen in the rest of the organization. As sales slowed, we found some weakness in some of our disciplines behind the scenes. So we have met and spent a lot of time with our web team leadership, and they are implementing some new tools that we've just authorized that are starting to come online now to help drive additional traffic to the website and bring more awareness to our products. And we're anxious to see how those perform over the next 2 quarters. But there, again, the most significant impact to that side of the business is the lack of major device launches that generates generally a lot of enthusiasm and excitement and people back to the website. So it's a combination of many of the same factors that we've talked about on the core business.

Operator

And our next question comes from the line of Paul Coster from JPMorgan.

Paul J. Chung - JP Morgan Chase & Co, Research Division

This is actually Paul Chung sitting in for Paul Coster. I just wanted to ask further expand on the gross margins. Where do you see it pushing out farther from 2013 as more mix comes from other products?

Randall L. Hales

Yes. We have said all along that it's important to the business, but we are not too dependent on any one given product categories. So we anticipate that the percentage of sales contribution from the invisibleSHIELD will continue to become a smaller percent of our total sales, and that's a very healthy thing for the business. But we will continue the discipline of making sure that new products being introduced are gross margin accretive wherever we can. So we're trying to offset some of that just natural gross margin pressure. We haven't given any guidance yet into 2014 and beyond, but we -- again, we are very comfortable with the low- to mid-40s this year. And as we model out 2014, during September, October, and announce that early next year, we'll provide more perspective on it.

Paul J. Chung - JP Morgan Chase & Co, Research Division

Okay. So like a target for new product would be to the low mid-40s as well?

Randall L. Hales

Correct. Yes.

Paul J. Chung - JP Morgan Chase & Co, Research Division

Got you. And quick housekeeping question, what percentage of sales are attached to Apple? And what do you expect moving forward?

Randall L. Hales

Yes. So it's definitely down this year as compared to last year. This year, year-to-date, we're in the low- to mid-40s and we anticipate that will change as they introduce new products later in the year. Certainly, planned new product introductions. But probably on the year somewhere below 50%.

Operator

And our next question comes from the line of Mike Latimore from Northland Capital.

Michael Latimore - Northland Capital Markets, Research Division

On that game controller, do you intend to sell that kind of as a suite with your gaming headsets as well into retailers or is that going to be sold sort of -- are you going to allow retailers to sell that independently of taking on gaming headsets?

Randall L. Hales

Definitely. Our ideal is that they set with the full complement of gaming products, both audio and controllers. However, the gaming audio market is very mature and so we have our work cut out for us there, and we would certainly move forward with sale of the game controller itself if that made sense for the retailer. But we're putting bundles together to make it attractive for them.

Michael Latimore - Northland Capital Markets, Research Division

Then the online sales or e-commerce, what -- as a percent of revenue, where should that be do you think in a normal business model for you over time?

Brandon T. O'Brien

Well, historically, it's been 12% to 15%, Mike, and that's the level that we're comfortable with. I think once we have the launch of new products later this year from Apple, we'll see that traffic come back online. But we've adopted some new tools to be more efficient in our spend and acquisition cost on the website. If we could keep it to that range of 12% to 15%, I think that's a range we're very comfortable with.

Michael Latimore - Northland Capital Markets, Research Division

And then how many 10% customers did you have and maybe give the percent of the top 2 perhaps?

Brandon T. O'Brien

Yes. So for the quarter, we had 2 that were over 10%. We had Walmart at 24% and Best Buy at 19% for the quarter. So it's a very strong quarter for us with Walmart with their spring reset. We got a lot of new audio SKUs in there and that helped to drive that up as a percentage of revenue in the quarter.

Operator

[Operator Instructions] Our next question comes from the line of Jon Hickman from Ladenburg.

Jon R. Hickman - Ladenburg Thalmann & Co. Inc., Research Division

My question has to do with the sales levels and the 2 initiatives that you did not execute on. Randy, is this a personnel issue or were there other factors that you're going to work on?

Randall L. Hales

Yes. I think it's a combination of both. We are out right now making some additional hires that I joined to help even more focus on some of those objectives. And perhaps, workload on some of our existing personnel was more than it should have been to drive the focus that we were looking for. I think with additional focus we've kind of taken a divide and conquer approach to many of our selling initiatives. As I mentioned in my remarks, I'll be getting very involved in the new business development side of things so that Derek can focus even more on the domestic piece of business, while we bring in some international sales talent. So a combination of number of things.

Jon R. Hickman - Ladenburg Thalmann & Co. Inc., Research Division

And then, if you're still comfortable with gross margins in the low- to mid-40s but you're talking about increased spends that would drive your adjusted EBITDA towards the low $40 million range, are we to assume that your advertising and your SG&A is going to go up materially here in the next 2 quarters?

Randall L. Hales

Yes. I think there's a couple of things in there, Jon, that play into it. Number one, we are going to continue to invest in making sure we have the right people on the team and the resources they need to be effective and efficient from a selling perspective. We also are going to support the launch of these new devices very well. And oftentimes, that will require us, because of the short notice we have when they hit, to use airfreight and utilize that to have product in the store the day the devices are on shelves. So those are 2 of the things that we know we will have some uptick and expense on. And then we're guiding to, basically, what we've seen from our performance during the year thus far. And we want to make sure that we stay in that range until we can demonstrate that we can perform better than that. So there are a number of factors that there causing us to put guidance out there in that range from an EBITDA perspective.

Operator

And our next question comes from the line of Ron Weiss [ph] from Janney Capital Markets.

Sarang Vora - Janney Montgomery Scott LLC, Research Division

This is Sarang Vora from Janney. My question relates about Q4, last year in Q4 you had a 30% sales growth. Can you just highlight some of the reasons what gives you confidence of a positive sales growth in Q4?

Randall L. Hales

Yes. It certainly starts with at least our belief that there will be a number of new devices launched during the quarter that will drive that. And then just historically, going into the holiday season, it's a very strong selling period for us. So kind of got both of those things working together and we're very confident in what we're seeing shape up for the fourth quarter, as well as the introduction of our Caliber gaming controller.

Operator

And I see no further questions in the queue at this time. I would like to turn the conference back over for any closing comment.

Randall L. Hales

Well, thank you, for being here with us here today. And we look forward to demonstrating our performance against some of the operating objectives that we've set out and some of our new initiatives from a selling perspective. And we look forward to reporting on progress in our next quarterly call. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone have a good day.

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